Out-Law / Your Daily Need-To-Know

Japan loan deal to boost support for private sector projects in Africa

17 Sep 2014, 11:18 am

The African Development Bank (AfDB) has signed a concessional loan deal of $300 million with the government of Japan to support the private sector and promote development partnerships throughout Africa.

The AfDB said the agreement formed part of the ‘enhanced private sector assistance for Africa’ (EPSA) initiative, which was designed in partnership with the Japanese government to promote economic growth led by the private sector.

EPSA is a “multi-donor, multi-component initiative for resource mobilisation and development partnership” to support the AfDB’s private sector development strategy, the bank said.

Japan and the AfDB launched EPSA at the G8 summit in 2005. According to the AfDB, the three components of the initiative include a ‘fast track’ process for co-financing projects for the public sector, support from the AfDB-Japan ‘Fund for African Private Sector Assistance’ and loans to the private sector. “Major projects have been co-financed within this framework,” the AfDB said.

In addition to the signing of the agreement, Japan’s prime minister Shinzo Abe said during a visit to Ethiopia in January 2014 (9-page / 160 KB PDF) that his country would double its commitment to EPSA funds from $1 billion to $2bn for the period 2012 to 2017.

Abe said Japan would also continue to support the ‘African Business Education Initiative for Youth’, under which young Africans “who will shoulder responsibility for the future of business” between the countries will be selected to study at Japanese universities. During their studies in Japan, Africans will also have an opportunity to work as interns at Japanese companies, Abe said.

In December 2013, Japan signed a fourth private sector assistance loan of around $100m to help fund AfDB’s non-sovereign operations supporting African small and medium enterprises and investments “critical to private sector growth and development”. The AfDB said this included public-private partnerships “for the provision of essential economic infrastructure and direct investment by the AfDB in key African financial institutions and enterprises”.

Japan's foreign direct investment (FDI) to Africa in 2012 was more than $6bn, exceeding its target of $3.4bn, according to data published in March 2013.